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When General Motors and Chrysler took money from the U.S. government to prevent being consigned to history, the two storied domestic automakers had no choice but to put their fates in Uncle Sam's hands. After two very brief bankruptcies and billions in bailout cash, America's favorite bearded relative is looking to take its own pound of flesh.

Automotive News
is reporting that the Obama administration and the Treasury Department are planning to announce pay cuts of up to 90% for the top 25 earners at GM, Chrysler, GMAC and Chrysler Financial. U.S. pay czar Kenneth Feinberg reportedly negotiated the pay arrangements with the companies during four months of negotiations.

The reported cuts will put a deep gash into the pay of executives like Fritz Henderson, who reportedly earned $1.3 million last year. There is no word at this time whether the bonuses of top auto execs will also be trimmed. GM and Chrysler aren't the only TARP recipients to get a big-time pay cut either, as top execs from AIG, Bank of America and Citigroup are also going to experience the economic downturn in a very real way. According to AN sources, pay cuts will average around 50% between the seven companies. The AN source claims that AIG execs, for example, will not receive compensation that surpasses $200,000. Companies that have already paid back TARP money, however, will not be affected by the government-mandated pay cuts.

[Source: Automotive News, sub. req'd | Source photo by JUNG YEON-JE/AFP/Getty]


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  • 70 Comments
      Lar7789789
      • 5 Years Ago
      Well That was bound to happen. GM has basically been a bankrupt company that has been losing money for years because of their inability to build quality cars.

      I just think the public - well let me re-phrase that to mostly the GM lovers have been in denial for years

      But somewhere the screw ups at GM have to pay the price for getting bailed out at taxpayers expense.

      I don't see how GM can ever recover from this blunder that they created for years. I think a second banruptcy for them is looming
        • 5 Years Ago
        @Lar7789789
        -and I hope GM can prove you wrong : )
      • 5 Years Ago
      I am with John P. on this. People that think GM just hired a bunch of idiots that ran them in to the ground are foolish. You don't get up that high into the company by kissing ass and being a good liar. Most of these guys have real talent and will land good jobs of they choose to leave GM. Who would want to work for a company handcuffed by a government scrutinizing every decision, constantly being scorned by the general public just for being associated with GM, all for 90% of their pay? Even if you were offered a job that was technically a demotion but offered more pay/benefits than 90% of your current salary without the stigma, it would be a better deal. This is like signing a talented free agent to your team because the team that dropped them couldn't afford it.
        • 5 Years Ago
        "You don't get up that high into the company by kissing ass and being a good liar."

        A lot of people would beg to differ.
      • 5 Years Ago
      "...these companies still need to find talent on the open market, and sharp people aren't going to work for peanuts."

      I can't speak for AIG or BofA, but when it comes to GM, this was precisely the problem: they *weren't* looking for talent on the open market. They were promoting from within the GM good old boy's club, giving people positions they really could not perform well in. This is a one-year slap on the wrist, and may jump-start these insular companies' search for talent outside the fishbowl.
      • 5 Years Ago
      The athlete pay scale analogy is a poor one at best. Sports teams aren't supported by tax dollars. The biggest down-side to high salaries is high ticket prices. The stadiums start getting empty on game days and the salaries will start falling, you watch.
      As far as the other points being made about Gov't intervention etc. are also poor arguments to make since these mega companies play at a totally different level. Look at it this way; a small business is mis-managed, it fails. Maybe a couple hundred people are affected. Boo-hoo. One of these businesses goes under, HUGE ripples reach out through the whole country. You think this doesn't factor into the thinking of the management of companies like GM and others? They KNOW that no matter what, the Gov't won't let them fail, so they go on treating the company like it's got this endless supply of cash.
      • 5 Years Ago
      "Obama administration and the Treasury Department are planning to announce pay cuts of up to 90% for the top 25 earners at GM, "

      .... but don't call GM "Government Motors." ... Heh.
        • 5 Years Ago
        Please explain why you seem to champion executives, who had to beg their Uncle Sammy to bail their a$$es out (to stay in business). The right to reward themselves pay & benefits that match those of SUCCESSFUL businessmen & women at companies who DID NOT need government $$$ to stay in biz!!!

        As poorly as GM has been run... why continue to pay these executives their seven-figure pay for their "expert brilliance"??? The janitor making 45K could have steered the GM ship into the iceberg too! One is much cheaper!! :) :)

        I'm being a tad sarcastic... but when you have to use other peoples $$$ to keep the lights on, you make concessions & do what the $$$ people tell you, Don't like it? LEAVE!!! Also, good luck getting big $$$ from a new company with a bankrupt corp. on your resume.

        So don't feel sorry for Fritz & company. as they will have to adjust their budgets ... GEE just like a majority of the workers in this economy... WOW what a concept eh Tom?
        • 5 Years Ago
        The $45k janitor was gone long before the bankruptcy. Perhaps if the executives had starting making concessions earlier like the drones did, they might have avoided some of the issues.
        • 5 Years Ago
        AZZO45b: "Please explain why you seem to champion executives,"

        Please explain how you got that I supposedly 'champion executives' when my comment had nothing to do with executives.
        • 5 Years Ago
        daleam: Notice I said I was being a bit sarcastic with my janitor bit! :) :)

        We seem to agree... these top executive were paid top $$$ & failed to perform. Why pay top dollar for sub-par work? Pay, benefits, & bonuses are paid for results... how much of their MBA knowledge did they use asking Uncle Sam for a loan?
      • 5 Years Ago
      Yeah! Let's punish the guys that are trying to fix the mess created by others! Great idea!

      This is hilarious, the government bailed out the car companies, yet they still went bankrupt, and now the gov't is setting pay levels. This appears to be an exercise to determine how many mistakes a government can make in one year. Not to mention this just means the execs will get bigger bonuses to offset salary losses. This is just more political appeasement of the irrational pitchfork and torch crowd like CkretAjint who just can't stand the idea of someone making a lot of money.

      At least we've got more Czar's then 1800's Russia!
        • 5 Years Ago
        Expect more of this. All across our country for the next 3 and a half years.
      • 5 Years Ago
      This makes no sense at all.

      Executive employees at that level are not "at will" like most of us and cannot just have their pay cut because Obama says so. They have employment contracts, much the same way pro athletes do for X years at Y compensation. Unless it was specifically called out in the bankruptcy, a pay cut cannot be forced onto anyone.

      Bottom line (like it or not) those executives have employment contracts, they will sue for breach of contract, and the company will end up paying their salary plus an additional 50% in attorney fees.
      • 5 Years Ago
      good point junky -- if you are the "worst" NFL team player and still pulling in almost a million dollars, that speaks very loudly for where the priorities of americans REALLY are.

      We dump all our money into entertainment and frivilous things and then when the sh*t hits the fan we look around and wonder what happened. Friendly tip: even if you cut the salaries of football players they will STILL play after they get thru bitching, say 200k a year to play a GAME, still a pretty sweet deal.

      Back to topic - in the tough times, yeah pulling in a million+ during one of the absolute WORST times of your company can be excessive sounding to us people down on the totem poll, but I do realize that if you want someone to come in and turn the company around you have to give them a proper incentive, and not a golden parachute. The key is finding the "right" guy, when they do if he/she comes in and turns the company around and puts them back in the game of course they should be awarded 10's of millions of dollars for their work.
        • 5 Years Ago
        Jeff... I'll keep this simple for you. The WORST of the NFL teams still make $$$. Most stadiums are SOLD OUT on Sunday & the TV contracts drop a crapload of additional $$$ to NFL owners. This allows them to "overpay" sub-par players.

        GM & Chrysler executives not only "fumbled"... they lost incredible amounts of $$$. The Detroit Lions went 0-16 & the owner cried all the way to the bank.

      • 5 Years Ago
      I am not going to read all the other comments, but here are my reflections:

      1. The government, in its present position as the majority shareholder of GM (the arrangement with Chrysler is different), has every right to control executive compensation. This doesn't apply to the still publicly traded banks/finance companies. It definitely seems like they are outside the bounds of what a normal shareholder can do. They does not mean, however, that the government has not acted out of bounds in handling GM and Chrysler. The chief example is them firing Wagoneer and promoting Fritz. At the time the government, as bondholders, had no legal standing to direct the operations of the company in any fashion.

      2. This is not to say that the government should be a majority owner in the first place. I believe GM owed more money to Wall Street than it did to the government and the UAW. Those firms/funds/banks should own at least part of GM, they don't own a single share. Chances are that if ownership was distributed in a more reasonable fashion no single entity would have a majority stake.

      3. Many banks were forced to take money (Goldman Sachs and BB&T for sure), but even worse was that at least BofA was forced (the Fed is a powerful thing) to buy another bank. This resulted in them needing TARP money (and made little sense in light of the "too big to fail" mantra that GWB repeated endlessly). In contrast, GM and Chrysler asked (begged might be more accurate) for money (this isn't to say that Citigroup and AIG wouldn't have eventually gotten to that point themselves). Kind of irrelevant, but it's a distinction a lot of people seem to not realize exists.

      4. This cap is nothing short of asinine and will cause a major brain drain away from GM and the banks.

      5. Couldn't Fiat ignore the cap by paying Chrysler executives out of their own coffers? I also thought they were the majority owner, but then I could be wrong.
      • 5 Years Ago
      I'd like to see our Congress take a pay cut. You know, the kind where they get paid yearly and not work for one term and get paid for the rest of their lives, and get fired for screwing it up or breaking the law. But what can you expect from them if Ted Kennedy can kill a woman and everyone cries about how great a man he is, or that Mark Sanford can use state funded jets to go get some poontang in South America and not get immediately fired for it. Yeah yeah, you can vote them out blah blah. But they shouldn't get a lifetime payment for NOT doing their jobs for a single term. To me this is a very big kettel calling the pot black. You know what they say about living in a glass house.
      • 5 Years Ago
      I don't understand how the government can retroactively apply conditions to the acceptance of TARP funds. Isn't that called extortion?
        • 5 Years Ago
        Fritz is probably regretting helping Obama shove that knife into Wagoner's back.
        • 5 Years Ago
        What better incentive for greedy people to pay back their tax payer loans than to control their part of the free public money? And now the next shoe to drop will be to monitor the banking system to make sure their greed doesn't take the country down again.
        • 5 Years Ago
        We don't know that this is retroactive, as we don't know what conditions were attached to the money up front. None of us has seen the actual contracts.

        The way I choose to look at this (rightly or wrongly) is that the government now has several seats on the board of directors of these companies, and they're exercising their rights as directors to set executive compensation.
        • 5 Years Ago
        This whole executive pay thing seems more like a populist outcry rather than a rational policy. While executive pay can be excessive, these companies still need to find talent on the open market, and sharp people aren't going to work for peanuts.

        Plus, shouldn't the Govt have made these unilateral decisions as a condition of the loan/bailout and made the cuts at the time of loan disbursement? To do it now seems like B.S. to me.

        • 5 Years Ago
        i'm stupid happy to hear this. After reading the article you had posted about Steve Rattner and how shocked he was at the condition/structure of GM management and how poorly they ran the company i couldn't be more enthused. I know its nothing compared to the retirement/legacy benefits thats GM complained about for so long that the UAW was sucking out of them, but these executives were seriously getting tens of millions of dollars a year for doing a crappy job. I can't think of any other industry that would pay itself so much, and give themselves raise after raise for doing crappy work. Actually, i can...the US Congress. But thats a whole 'nother story.
        • 5 Years Ago
        When the government (for that matter and company) owns 80% of a company it can pay their employees what ever it chooses. Here is how the board room goes. Who wants pay checks? Everybody, but the government raises their hands. Oh wait there is only person who gets to make that decisions, since we approved them taking over our company because we couldn't make decisions on own. Won't be getting checks this year.

        Come on, lets face it. Company such as GM, Chrysler, AIG, B of A, Citi, etc. made such bad choices that their execs don't deserve to paid the amounts they were getting. If your company does well , then I don't care how much they make. However, when we lent you, and in the terms of Chrysler and GM gave you money, don't expect million dollar a year salaries.
        • 5 Years Ago
        "...these companies still need to find talent on the open market, and sharp people aren't going to work for peanuts."

        I can't speak for AIG or BofA, but when it comes to GM, this was precisely the problem: they *weren't* looking for talent on the open market. They were promoting from within the GM good old boy's club, giving people positions they really could not perform well in. This is a one-year slap on the wrist, and may jump-start these insular companies' search for talent outside the fishbowl.
        • 5 Years Ago
        Some here better review what happened when Clinton played this game. It wasn't pretty, or a valid exercise.

        And it won't be now.
        • 5 Years Ago
        Part of the contract was "The US Government can unilaterally change any aspect of this agreement at any time." If you want to go visit the loan shark, you'd better be prepared to pay his fee.
        • 5 Years Ago
        I suppose that's a valid interpretation.
      • 5 Years Ago
      I only read the first 20 posts and at least 15 are the same old story. "They deserve it. They ran the companies into the ground" etc etc etc.

      Well if these CEO's deserve a pay cut for doing a bad job, "HOW ABOUT CONGRESS"

      If you go with the popular political theme ( and that is all this is) "These AH's in congress should be paying back their salary plus some ."

      Just remember. The guy that makes less than you thinks "you don't deserve it"
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